Illinois Matrimonial & Family Law

Skipping the HFS Table

to Determine Net Income

(Doing It the Hard Way)

by Wes Cowell; updated 20 July 2017 -- suggest a correction

 

Net Income is determined by using the HFS Gross-to-Net-Income table.  Parties may agree to use a different method, deducting  however, and you can always seek a hearing before the judge to determine "net income" without resorting to the HFS table.  allowable deductions from gross income.   Need advice? Call, leave your info., or schedule a consult.

 

The parties may want to avoid the HFS table and calculate "net income" by a different method.   When parents do this, they may deduct from gross income certain amounts to arrive at net income.  The lower the net income amount, the lower the child support obligation.  The old law (750 ILCS 5/505, West, 2010) identified only a few, allowable deductions, but they are expanded by case law with each year's batch of appellate cases.  

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SKIPPING THE HFS TABLE

TO DETERMINE NET INCOME

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CONTENTS

 

Avoiding the Standardized Tax Table and Getting to the Judge:

By Agreement

"Summary" | Temporary | 501 Hearings

Evidentiary Hearing

Allowable Deductions

Federal income tax

State income tax

Social Security

Mandatory retirement contributions

FERS / TSP

SURS

Railroad Retirement System

Tier I

Tier II

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Avoiding the Standardized Tax Table and Getting to the Judge:  There are three ways to avoid the HFS net income table:

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1.  By Agreement.  Whether you and yours agree on anything else, if you agree on a "computation method" for the individualized tax amount that is different from the method  spelled out in the law, the judge MUST use your agreed-to method unless she rejects it for "good cause."

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2.  "Summary" | Temporary | 501 Hearings:  Summary hearings are usually done at the outset of a case -- the parents have just split up and there are no orders in place about who pays which bills and how we keep food on the table and the lights turned on.  These are also known as "hearings for temporary relief" or "501 hearings" (section 501 of the law addresses "temporary relief").

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In such hearings, either party may elect to have the judge -- not the HFS tables -- determine "net income" using the "individualized tax" method (subtract federal and state income taxes, Social Security taxes, and Medicare taxes, as above) on the basis of information contained in one or both parties' financial affidavit and supporting documents.  To opt in, you have to have your financial affidavit completed, your supporting documents in order, and have it all timely tendered to the other side. 

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3.  Evidentiary Hearing:  In some situations you can get away from the State's "standardized" black box table, skip the law's narrow definition of "net income" (as in summary hearings) and instead present all the nitty-gritty to the judge. The law says that "[i]In each such case (unless there is an agreement as per 1., above), the individualized tax amount shall be as determined by the court on the basis of the record established."

 

That last line "the individualized tax amount shall be determined by the court on the record established" does two things:

1. requires the court to use the law's definition of "individualized tax amount ("the aggregate of the following taxes:  (I) federal income tax (properly calculated withholding or estimated payments); (II) State income tax (properly calculated withholding or estimated payments); and (III) Social Security (or, if none, mandatory retirement contributions required by law or as a condition of employment) and Medicare tax calculated at the Federal Insurance Contributions Act rate.

2. opens the door to get all sorts of information before the judge that isn't easily presented on the financial affidavits. 

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I include here the "allowable deductions" from the old, pre-7/1/2017 law -- the way we used to do it -- to serve as a guide for those who hope to prove their 

 

(a) Federal income tax (properly calculated withholding or estimated payments): Properly calculated taxes may be deducted from gross income in calculating "net income."   Taxes must be properly calculated..  Where an obligor has too much withheld from his paycheck (by declaring zero dependents or electing to have an additional amount withheld) then the net income is unfairly reduced.  In the course of events, the obligor receives the over-withheld amount as tax refund.  In those circumstances, the refund should be added back in to the obligor's gross income (again, all income from all sources).  In re:  Marriage of Pylawka, 277 Ill.App.3d 728, 214 Ill.Dec. 651 661 N.E.2d 505, (2d Dist., 1996)

 

(b) State income tax (properly calculated withholding or estimated payments):  The same rules that apply to federal withholding taxes also apply to state withholding taxes.  Note that the law specifically applies only to state income taxes.  Real estate and other state taxes are not included.

 

(c) Social Security (FICA payments):  In 2015, the FICA tax is 6.2% and applies to only the first $118,500 of wages (for a maximum tax of $7,254).  As an aside, whenever you hear politicians say "The Social Security Trust Fund is going bankrupt 1) that's not true and 2) any shortfall in Social Security funds can be easily corrected by adjusting the cap -- say, to apply only to wages earned OVER $120,000.  Anyway, back to child support: If an obligor earns, say, $250,000, the employer stops withholding the FICA tax around mid-September.  That means that, after Labor Day, each year, that obligor realizes, essentially, a 6.2% raise.  If you calculate child support in, say, August, you'll be looking at pay stubs that show a FICA tax being withheld.  A few weeks later, that tax will not be withheld.  Be sure to take this into consideration.  

 

(d) Mandatory retirement contributions required by law or as a condition of employment:  Most private sector employees do not have mandatory retirement contributions.  Many government sector employees do.  

 

FERS / TSP:  In 1987 Congress created the Federal Employees Retirement System (FERS).  It has three components (Basic Benefits, Social Security and Thrift Savings Plans (TSP).  The Basic Benefits and Social Security components are mandatory . . . TSP is not.  TSP is an employer-matching, tax deferred savings program.  Take note that the employer's matching contributions should be considered income ("all income from all sources").

 

SURS:  In Illinois, we have the State University Retirement System (SURS) which essentially fills in for Social Security for certain employees.    

 

Railroad Retirement System:  (Special Thanks to Peter Orlowicz, General Attorney, U.S. Railroad Retirement Board)  The Railroad Retirement System was created by Congress in the 1930s . . . around the same time that Social Security was created.  Railroad Retirement benefits are made up of Tier I and Tier II components.  They are required payroll taxes for covered railroad employees under the Railroad Retirement Tax Act, 26 U.S.C. §3201 et seq.

 

Tier I is a replacement for Social Security and contributions are mandatory.  26 U.S.C. §3201(a).  They are deductible from gross income when determining net income for child support purposes.

 

Tier II is a defined benefit plan like other pensions. Deductions for Tier II retirement benefits are mandatory.  26 U.S.C. §3201(b).  They are deductible from gross income when determining net income for child support purposes.  Individual employees don't choose the level of tax paid.  The amount of Tier II tax is determined by a formula published at 26 U.S.C. §3241.    

 

Some railroad employee's pay-stubs may show additional pension or 401(k)-type deductions withheld by the railroad employer.  This is particularly true at larger railroad employers like BNSF or Union Pacific.  The Railroad Retirement Board doesn't administer those plans, however, and they cannot be characterized as Tier II deductions.  When in doubt, contact the employer, identify the plan administrator, and check it out.